The Mobile Payment Wars Are Officially Underway

Google is joining the race to dominate the mobile payment market in partnership with MasterCard, Citibank, Sprint and various retailers. The company will announce Thursday a "mobile wallet" service available for now only on the Google Nexus S that will enable users to make contactless payments on MasterCard PayPass terminals using near-field-communication (N.F.C.) technology, reports Bloomberg News. The program will launch in five cities--New York, San Francisco, Los Angeles, Chicago and Washington, D.C--this summer, and at least three major retailers--Macy's, American Eagle and Subway--will feature the payment system alongside customer rewards programs, according toThe New York Times.

Obviously, Apple is going to be upset by the announcement that Google will beat them to market. Bloomberg reported in January that Steve Jobs and his crew had been working on integrating N.F.C. technology into the iPhone and iPad in an effort to grab a share of $6.2 trillion American consumers spend every year. The company hired a mobile payment guru and applied for a patent on N.F.C. technology for Apple apps to communicate with each other but have yet to announce a plan. The Apple fan blog, Cult of Mac, speculates this morning that Apple's mobile wallet is unlikely to be unveiled before 2012.

It's entirely possible, however, that Apple is being characteristically Machiavellian in its mobile payment strategy. N.F.C capabilities top the list of rumors swirling about the release date and feature set on the iPhone 5, and the June deadline for the annual iPhone update is just days away. Apple could presumably drop a bombshell at the Worldwide Developers Conference beginning June 6. An N.F.C.-enabled iPhone that depended on mobile payment start-ups to figure out the details would immediately stand to grab a larger market share than Google's still relatively restrictive program which demands users use the still not super popular Nexus S.

Whether or not this is Apple's plan, Twitter co-founder Jack Dorsey has a heck of a head start from the start-up perspective. Monday, Dorsey announced that his new mobile payment start-up, Square, was processing $3 million in mobile payments and turning iPads into cash registers. Square's system works without N.F.C. technology but requires retailers to plug a peripheral card swiper into the headphone jack of a mobile device. In partnership with Visa, a new product called Square Card Case will work much like Google's mobile wallet and allow consumers to pay with their mobile phones at select retailers. Square also works on Google-powered Droid devices, but their lead in launching N.F.C. capabilities might not be enough. Apple's relatively large group of iPhone users and total dominance in the tablet market may still produce the critical mass needed to become the mobile payment standard.

Now all that's missing for a full on war would be eBay teaming up with Facebook, Foursquare, Blackberry or all three. The online auction site and its subsidiary PayPal has been investing billions in mobile payment technology. Wary of PayPal's head start in the virtual payment arena, Bank of America, JPMorgan Chase and Wells Fargo announced today a competing service called clearXchangethat allows money transfers via phones or email today.